For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

All investing is subject to risk, including possible loss of principal.

If you think your clients have had reason to feel uneasy about the investment environ­ment lately, you’re not imagining things. In just the past few months, we’ve seen economic uncertainty, intense political polarization, and superlow bond yields. Yet, at the same time, the stock market kept pushing higher.

In this confusing and sometimes contradictory climate, you may be asking yourself a question: How do I help my clients make sense of all this, keep them investing, and still get a good night’s sleep?

I love the way one of our investment pros put it. Fran Kinniry this past summer told The Wall Street Journal, “Investing is always a partnership between you and the markets.”1 He explained that the markets carried more than their fair share of the weight for a couple of decades, through the 1990s, providing outsized returns that made the investor’s half of the partnership relatively light work. “But now you are going to have to be the majority partner.”

Sobering? Sure. Hopeless? Definitely not.

Although the “save more” logic is easy for most to grasp, it’s not always easy to persuade your clients to follow it. Bills, illness, the loss of a job—these can affect any of us.

But whatever the circumstances, helping your clients figure out how to save more is worth the effort. It requires them to make difficult decisions to forgo some consumption today to increase the likelihood of consuming (or consuming more) in the future. This is at the very heart of investing. Sacrifices are never fun, so talk to your clients about carrying them out systematically and in doses they will be comfortable with—for instance, gradually getting up to the maximum contribution in their IRA, or adding a percentage point or so to the amount they stash in their employer’s retirement plan. As a point of reference, we generally suggest that investors strive for a retirement savings rate of 12% to 15%, including any employer contributions.

If your clients need more convincing about the wisdom of the “save more” course of action, it might help to show them their alternatives. This list is by no means exhaustive, but it hits on a few of the big ones, and none is without risk.

Reach for yield. With yields so low on many types of bonds, it’s tempting to find the corners of the fixed income market where payouts are juicier. But with the juice comes considerable risk. They’d be taking on more risk—possibly much more.

Go all-in on a hot-performing asset class or fund. By now, we know better than that, right?

Sit tight. This approach isn’t a terrible idea; it’s better than panicking and deciding to just “do something,” particularly if that means changing your approach in response to the markets’ movements.

Here’s the inescapably challenging part of a partnership with the markets: In the short run, the “partner” is fickle, emotional, and wildly unpredictable. But in the long run, the partnership is mostly rational and extremely helpful. Maybe the markets will deliver better-than-expected returns. Maybe they’ll be consistent with our more modest expectations. In either case, a higher savings rate can help put your clients in a better position to reach their goals.

Bill McNabb

F. William McNabb III is chairman and chief executive officer of Vanguard. Mr. McNabb joined Vanguard in 1986, became chief executive officer in 2008, and chairman of the board of directors and the board of trustees in 2010. Previously, he led each of Vanguard’s client-facing business divisions. Mr. McNabb is active in the investment management industry and serves as the chairman of the Investment Company Institute. He also serves as chairman of the board of directors of the Zoological Society of Philadelphia and on the board of the United Way of Greater Philadelphia and Southern New Jersey, the Wharton Leadership Advisory Board, and the Dartmouth Athletics Advisory Board. Mr. McNabb earned an A.B. at Dartmouth College and an M.B.A. at The Wharton School of the University of Pennsylvania.

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For more information about Vanguard funds or Vanguard ETFs, visit advisors.vanguard.com or call 800-997-2798 to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information are contained in the prospectus; read and consider it carefully before investing.

Vanguard ETF Shares are not redeemable with the issuing Fund other than in very large aggregations worth millions of dollars. Instead, investors must buy and sell Vanguard ETF Shares in the secondary market and hold those shares in a brokerage account. In doing so, the investor may incur brokerage commissions and may pay more than net asset value when buying and receive less than net asset value when selling.

Investments in bond funds are subject to interest rate, credit, and inflation risk.

Diversification does not ensure a profit or protect against a loss.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.

All investing is subject to risk, including possible loss of principal.

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